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3 Small Stocks That Could Make Investors Rich

Despite economic challenges, the United States remains as a
compelling hotbed of innovation. So many items in everyday use --
especially in the field of medicine -- got their start here. [In
fact, Andy Obermueller recently revealed his favorite game-changing
medical picks in the latest issue of
Game-Changing Stocks
]

The quest is always on to develop devices, drugs and services that
help save money and boost the user's experience. And investors who
get in early can be richly rewarded.

Of course, the path from idea to large-scale revenue can be
excruciatingly slow at times. And up until now, these three
companies were better known for consuming capital. But each of them
has hit upon novel, potentially game-changing technologies that may
eventually shower investors with riches.

BioLase Technologies (Nasdaq: BLTI)
Nobody likes going to the dentist. Memories of a metal drill boring
into our gums linger long, and it's often a reason why people don't
go to the dentist as often as they should. But Biolase has an
alternative: Lasers that can cut dental tissue in a very precise
fashion. As you know, the use of a drill usually requires that a
patient be injected with Novocain since drilling and grinding can
be quite painful. Lasers cause no pain and require no anesthetic.
This shortens the amount of time a patient is in the dental chair,
allowing dentists to see more patients in any given day. It also
leads to much happier patients, making them more likely to maintain
regular dental visits.

Yet the set-up can be expensive for dentists, which explains why
only a minority have gone the laser route. In the first half of the
past decade, sales grew sharply, hitting $67 million by 2007. Sales
have since cooled and most recently outright plunged as the company
was unable to see its products gain traction with key dental
distributors such as
Henry Schein (Nasdaq: HSIN)
.Shares of Biolase, which hit $18 in 2004, have lost 90% of their
value.

Despite appearances, laser-based dentistry wasn't a bust. Instead,
the company has been forced to re-think designs, remove costs from
the manufacturing process, and alter sales incentive programs with
distributors. The outlook for 2011 is perking up, setting the stage
for the first year of sales growth since 2006.

Among the positive recent developments: Biolase has recently signed
a second major U.S. distributor, Benco, that augments an existing
relationship with Henry Schein. In addition, the company is rolling
out new portable devices such as the iLase, which is off to an
impressive start. The company is also now expanding into Asia.

Needham's Dalton Chandler sees 2011 sales rebounding more than 50%
to $40 million, but even more modest sales growth at half that rate
would likely put like put this former hot stock back on investors'
radars.
Shares
of this microcap trade for around $1.50, but Needham predicts
they'll double in 2011.
Research Frontiers (Nasdaq: REFR)
This company has led many investors to chuckle. Most of its press
releases involve yet another round of capital-raising. The company
has cracked the $1 million sales mark just once and has never come
close to making aprofit . But Research Frontiers may have the last
laugh in 2011. The company's specialized glass technology, which
automatically adjusts to filter out sunlight at times of high
air-conditioning loads, has caught the attention of major
construction firms, some of which are expected to use the glass in
2011.

But it's the auto market that has captured a great deal of recent
buzz, pushing shares from $4 to $7 in the last three months.
Mercedes apparently intends to use Research Technology's "Smart
Glass" in an upcoming line of cars. Some suggest the technology
will be adopted for the whole car line, and the company's most
bullish supporters expect other auto makers to make similar moves
in 2011 as well.

The rising stock price implies those rumors may have merit. But the
company's history should give you pause. Research Frontiers has
been oh-so-close to success many times before but thus far has been
unable to capitalize on the opportunity. How big an opportunity
does the company face? The automotive glass industry likely tops $5
billion and the architectural glass biz is similarly-sized. If only
a small portion of auto makers and architects utilized the
technology and Research Frontiers was able to secure a small
percent of royalties, then the company may be looking at tens of
millions in revenue, most of which would flow to thebottom line .
Not bad for a company valued at just $122 million.

Sooner than later, we'll know if the Mercedes rumors are true.
Several months from now, shares will either be well higher than
current levels or they'll fall all the way back toward the $4 mark.

BSD Medical (Nasdaq: BSDM)
BSD's systems are used to treat certain tumors with heat
(hyperthermia) while increasing the effectiveness of other
therapies such as radiation therapy. Cancer cells can be killed at
just 108 degrees, a lower temperature than other cells. As the body
senses the heat in the treated area, it also moves to generate
other benefits such as increased blood flow, which raises oxygen
levels, which raises the effectiveness of radiation therapy. The
clinical data in support of BSD's devices have been quite strong.

This is another company that has been long on promise but short on
results. Sales cracked $5 million in 2008, but have been falling
since. Shares, which hit $7 in late 2007, fell all the way to $1
this past summer before a recent rebound back to almost $5. The
rebound comes from rising hopes that BSD's novel cancer treatment,
which has proven to be effective, could soon win more converts as
the company signs up a growing roster of distributors.

At this point, BSD must figure out ways to get the many customers
that have been testing the system to make a purchase. Or the
company needs to partner with -- or sell to -- a larger medical
device firm that is better-equipped to tackle this "missionary"
type sales effort. There's lot of promise here, but investors will
need to see better sales traction in 2011.

Action to Take -->
These stocks should never constitute core holdings in a portfolio.
But if you have some discretionary funds that can be tapped to
swing for the fences, these stocks may turn out to be tidy
additions. I like the basket approach: A small position in several
speculative plays. One home run can more than offset losers
elsewhere.

-- David Sterman

P.S. -- We've just identified six surprising events that could
break your portfolio wide open in 2011. Knowing these pivot points
in advance lets you focus your investing strategy like a beam of
light in the dark... and make a lot of money in a hurry. Get them
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Disclosure: Neither David Sterman nor StreetAuthority, LLC hold
positions in any securities mentioned in this article.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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